What debtors should know about Chapter 7 bankruptcy

Chapter 7 may be beneficial to many people; however, they must first qualify for this type of bankruptcy.

When people in Texas are faced with overwhelming medical expenses, credit card bills, mortgage payments and payday loans, they often search for debt relief options. Bankruptcy allows people to have a second start with their finances. While there are several types of bankruptcy, Chapter 7 is the most common. According to U.S. Bankruptcy Courts, out of the 794,960 people who filed for bankruptcy in 2016, 490,365 people filed for Chapter 7. Otherwise referred to as liquidation bankruptcy, Chapter 7 discharges many types of debt. However, debtors may have their unsecured property repossessed, sold and distributed to unpaid creditors if the trustee appointed to the case chooses.

Qualifying for Chapter 7

Not everyone can file for Chapter 7. Applicants must meet specific qualifications to qualify for this type of bankruptcy. The applicant must make a monthly income that is at or below the state median or pass a means test. The means test compares applicants' income with their expenses to ensure that they do not make over the state median. Furthermore, applicants must complete a credit counseling course 180 days before filing.

Submitting documents

When filing for Chapter 7, it is crucial that applicants have all of the required documentation. This includes the following:

· A list of current income: frequency, source and amount.

· A complete list of creditors and how much is owed to each one.

· Designated tax returns.

· Certificate of credit counseling.

· A list of all property, assets and liabilities.

· A complete list of monthly expenses, such as food, shelter, clothing, taxes, medical, utilities and other living necessities.

Although unsecured property may be repossessed, there are some items that are exempt from repossession. Sentimental items, items that are required for work and other property that's worth is below a certain amount may be retained by the debtor.

Automatic stay

Once the bankruptcy paperwork is filed, an automatic stay goes in place. This keeps harassing creditors from contacting the debtor by phone, email or mail. Furthermore, creditors are unable to file lawsuits or continue in pursuing legal action of any kind.

Meeting of creditors

The trustee who is appointed to the case will schedule a meeting of creditors, where the creditors involved are able to come and ask questions regarding the case. At the meeting, the trustee must make sure the debtor understands what filing for Chapter 7 entails. They will also look at the property and determine if anything should be distributed to creditors.

Obtaining legal assistance

Filing for bankruptcy may seem overwhelming, especially when you struggling to make ends meet. It can be difficult to ensure you have all the proper paperwork, take the right courses and attend the right meetings. An attorney in Texas may be essential to the case by helping to answer questions and exploring all of your legal options.